South African Gross Domestic Product (GDP) grew more than expected in the second quarter thanks to a recovery in mining and manufacturing, official data showed on Tuesday, in a reprieve for President Cyril Ramaphosa as the economy looks set to dodge recession this year.
After a downturn in the first half of 2018 when farming plunged, the economy has struggled to regain momentum, posting a shock contraction in the first quarter of this year.
Analysts said while the second-quarter GDP print could see South Africa avoid recession in 2019, it was not enough to stop credit rating downgrades linked to debt issues including bailouts for state power utility Eskom.
“It’s a great relief. A huge positive, but in reality it won’t do much for the credit rating situation. That’s more about debt,” Wayne McCurrie, portfolio manager at FNB Wealth and Investments told Reuters.
The rand extended gains after the data, firming more than 0.5% to a session high of 15.1125. GDP growth in the three months to June was 3.1 per cent, after a revised contraction of 3.1% in the first quarter, Statistics South Africa said. Economists polled by Reuters had predicted an expansion of 2.4 per cent for the quarter. The second-quarter growth was the highest since the fourth quarter of 2017. Year-on year GDP growth was 0.9 per cent, compared with zero previously.